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Telekom Austria warns on profits, remains confident on Slim deal

Fierce price competition, the challenging economic environment and regulation of fees have created a perfect storm for Telekom Austria, which this week warned that full-year profits and sales would not meet its targets.

According to a report from Reuters, the Austrian operator said it now expected full-year EBITDA to be €1.4 billion to €1.45 billion, compared to a May forecast of €1.5 billion. Revenues are now expected to fall to €4.2 billion from €4.45 billion in 2011, against a previous expectation of €4.4 billion.

Reuters noted that Telekom Austria maintained its dividend target of €0.38 per share, which will no doubt come as welcome news to Carlos Slim: his telecoms group América Móvil agreed to buy 21 per cent of Telekom Austria in June. Meanwhile Slim's other European play, KPN, cut its dividend last month; América Móvil has already acquired a 28 per cent stake in the Dutch operator.

The plan by Slim to buy a stake in Telekom Austria is still in the regulatory approvals process, but CEO Hannes Ametsreiter told Reuters he is getting positive signals from politicians in Austria. So far Austria's competition regulator has approved the bid, but it could still be blocked by the Economy Ministry.

Reuters noted that Slim is also unlikely to be too alarmed by Telekom Austria's downgraded forecast for this year, citing América Móvil CFO Carlos Garcia Moreno as saying in June that his company was prepared for short-term turbulence in the market.

"Clearly, Europe has a number of challenges that they have to face in the short term. But we think that with a long-term perspective, valuations in Europe today appear to be attractive, probably even more so than in other markets," he said at the time.

Telekom Austria's financial situation has been adversely impacted by lower average revenue per user in Austria, Bulgaria and Croatia and hyperinflation in Belarus.

According to a TeleGeography report, meanwhile, the Austrian operator's subsidiaries in Croatia and Slovenia, VIPnet and Si.Mobil, have seen second-quarter results boosted by an increase in mobile broadband customers.